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EVP & CFO Vincent Chao explained the bad debt forecast is a prudent measure to maintain 'dry powder' for the unresolved At Home bankruptcy and normal course turnover. President and CEO Stephen Horn added that the pricing spread for portfolios has widened, with some larger portfolios trading at a premium due to new capital entering the space.

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CEO Christopher Marr responded that the trend is the opposite of an increase, citing high costs for materials, land, and labor, along with tight financing, as significant headwinds for new development. He believes it will be 'a bit of a ways to go' before new supply pencils out, making the supply outlook for 2026-2027 constructive for existing operators.

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President & CEO Christopher Marr responded that construction starts are actually trending down due to a combination of high material costs, expensive labor, and tight financing conditions. He believes a significant gap remains before rental rates can support the economics of new development projects.

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Chief Investment Officer Matthew Birenbaum explained that while overall leasing velocity remains strong at around 30 homes per month, one urban Denver project faced elevated concessions in a competitive submarket. He and COO Sean Breslin expressed confidence in catching up by year-end, citing strong performance in newly opened lease-ups in markets like South Miami and Northern New Jersey.

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SVP & COO Michael Lacy explained that the guidance raise is based on strong execution to date, with first-half blended rent growth exceeding the high end of the original guide. He noted that while market rents have been more muted recently, leading to a revised back-half outlook with renewal growth around 4-4.5%, the strong first-half performance provides a buffer. He also confirmed the spread between coastal and Sunbelt markets is narrowing as expected, from a 450 basis point gap in Q1 to around 400 basis points in Q2.

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CEO John Kite reported that leasing activity has accelerated, with no slowdown related to tariffs, and highlighted strong demand across the board. President & COO Tom McGowan added that landlord-tenant cooperation is improving to expedite store openings. Kite also noted the success in achieving higher rent growth, citing 3.4% embedded escalators on new small shop leases as evidence.

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CEO John Kite stated that leasing activity has picked up substantially, with no signs of indecisiveness from tenants. President & COO Tom McGowan added that cooperation between landlords and tenants has improved to expedite store openings. Regarding escalators, John Kite pointed to the company's results, including 3.4% embedded growth in the first half of the year, as proof of their success, noting it's a key focus.

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Chairman and CEO John Kite stated that leasing activity has picked up substantially, with significant demand across the board, negating any earlier indecisiveness. President and COO Thomas McGowan added that landlord-tenant cooperation has increased to expedite store openings. Regarding escalators, Mr. Kite cited the 3.4% achieved on new small shop leases as evidence of their success, while acknowledging it remains a challenge with anchor tenants.

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EVP & CFO Mike Mas clarified that the Q2 recovery rate was boosted by a one-time, approximately $1 million benefit from the annual reconciliation process. He anticipates the rate will decline by about 100 basis points from Q2 levels going forward. However, the fundamental driver of higher recoveries—a projected 100+ basis point increase in average commenced occupancy for the year—will ensure rates remain strong.

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CFO Mike Moss stated that the recovery rate will likely decelerate going forward. He explained that Q2 included a one-time benefit of approximately $1 million from the annual reconciliation process. The fundamental driver of the elevated rate is higher average commenced occupancy, which is now projected to increase by over 100 basis points for the full year, providing a sustained, albeit lower, benefit.

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CEO Shankh Mitra explained that a low-leverage, strong balance sheet is core to their 'handshake business' model, ensuring they can always honor commitments. He stated that the funding mix—debt, equity, asset sales, and retained cash flow—is determined by the most attractive risk-adjusted cost of capital at a given time. As conviction in growth rises, the internal cost of equity increases, which can make debt a more attractive option.

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Shankh Mitra (CEO & CIO) stated that it currently makes no economic sense to build. He explained that a 25-30% increase in RevPOR relative to operating labor costs would be needed for new construction to become viable, a level not achievable by rent growth alone in most markets.

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CEO Scott Brinker stated that the 4 million square feet of supply removed was mostly less competitive space, though some directly competitive properties are now marketing to alternative uses. For MOBs, he indicated that cap rates for the types of high-quality assets Healthpeak owns are trading in the 6% to 7% range. He noted that life science cap rates are much harder to pinpoint due to lower transaction volume, except for long-term leased, credit-tenant assets.

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CEO Scott Brinker stated that most of the lab supply removed from the pipeline was not directly competitive, though some competitive space is now being marketed for alternative uses. He estimated that cap rates for Healthpeak's quality of MOB assets are trading in the 6% to 7% range, while life science cap rates remain much harder to determine.

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Joel Marcus, Founder & Executive Chairman, explained that major R&D firms seek comprehensive, amenity-rich campus environments, not isolated buildings. Hallie Kuhn, SVP of Life Science & Capital Markets, added that the specialized infrastructure needs of such tenants, like power capacity and vibration controls, necessitate a build-to-suit solution. Regarding the pipeline, Mr. Marcus stated that trends are highly specific to each submarket, making generalizations difficult.

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CFO Karen Brennan noted encouraging signs in office leasing, with the U.S. market about 80% through its downsizing cycle and activity at its highest since 2019. She expects gradual leasing growth in 2025. CEO Christian Ulbrich stated that capital allocation balances share repurchases against platform investments and M&A, with a commitment to at least offset share dilution from stock compensation.

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Executive Angela Kleiman explained that Essex has shifted to a seasonal occupancy-focused strategy for Q4. Renewal offers are being sent in the mid-4% range and are finalizing in the high-3s. Regarding Proposition 33, she expressed confidence it would be defeated, noting that only 8% of California cities have rent control, many mayors oppose the measure, and similar initiatives failed by large margins in 2018 and 2020.

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EVP, Co-CIO John McGrath confirmed all California sales would be outright. CEO Terry Considine explained the JV was an advantageous balance of maintaining the operating platform, adding value, and achieving attractive levered returns. EVP & CFO Paul Beldin reported the OP units were priced at approximately $50 per unit, based on a trailing average price at closing.

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